Consumer proposal

A consumer proposal is a formal procedure governed by the Bankruptcy and Insolvency Act and is available to individuals whose total debts do not exceed 250 000 $, not including debts secured by their principal residence. With a consumer proposal, you work with a licensed insolvency trustee to put together an offer to pay your creditors a percentage of what you owe them over a specific period of time, extend the time you have to pay off the debt or a combination of both. Payments are made through the licensed insolvancy trustee, and the licensed insolvancy trustee uses that money to pay each of your creditors. Compared with the Division 1 proposal, a consumer proposal is a simplified process and is available to individuals only.

The advantages of a consumer proposal are that you retain all of your assets, actions against you by unsecured creditors, such as wage garnishments, will be stayed (stopped) and you can solve your money problems without having to declare bankruptcy.

The licensed insolvancy trustee will file the proposal with the Office of the Superintendent of Bankruptcy (OSB). Once your proposal is filed, you will stop making any payments directly to your unsecured creditors, any salary garnishments will stop and lawsuits against you by creditors will be stayed (stopped).

The licensed insolvancy trustee will submit the proposal to your creditors, including a report on your personal situation and the causes of your financial difficulties.

Creditors have 45 days to either accept or reject the proposal.

Any creditors with a proven claim may assent to (accept) or dissent from (object to) the proposal. This can be done either prior to or at the meeting of creditors, if one is held. It can also be done within 45 days following the filing of the consumer proposal.

Any acceptance of, or objection to, a proposal counts as a vote at the meeting of creditors, if one is held, provided it is received at or before the meeting.

Any objection received is not considered a request for a meeting of creditors and will not count as a vote on the proposal unless there is an obligation to call a meeting of creditors.

In the event that a meeting of creditors is called:

A meeting of creditor will be called if one is requested by one or more creditors having at least 25% of the value of the proven claims. This request must be made within 45 days of the filing of the proposal. The OSB can also direct the licensed insolvancy trustee to call a meeting of creditors at any time within this 45-day period. A meeting of creditors will be held within 21 days after being called.

At the meeting of creditors, the creditors vote to either accept or refuse the proposal.

The number of votes corresponds to the total dollar value (i.e.,50% plus one). For example, if the proven claims total 150 000 $, and if the creditors voting « yes » to accepting the proposal are together claiming at least 75 001 $, then the proposal will be deemed accepted and all other unsecured creditors must accept it as well. (In the event there is no quorum of creditors at the meeting, the proposal will be deemed accepted by the creditors).

If no obligation has arisen to apply to court within 15 days after the acceptance or deemed acceptance by the creditors, the proposal will be deemed to have been approved by the court.

In the event that a meeting of creditors is not called:

If no meeting of creditors is requested within 45 days of the filing of the proposal, the proposal will be deemed to have been accepted by the creditors, regardless of any objection(s) received.

If no obligation has arisen to apply to court within 15 days after the deemed acceptance, the proposal will be deemed to have been approved by the court.

If your consumer proposal is accepted,

You will be responsible for paying either a lump sum or periodic payments to the licensed insolvancy trustee and adhering to any other conditions in the proposal;

You retain yours assets so long as you make your payments to your secured creditors;

You must attend two financial counselling sessions; and

The proposal will be on your credit record for the duration of the term plus, depending on what province you live, a few years thereafter.

If your consumer proposal is not accepted, you can:

Make changes to the proposal and resubmit it for consideration;

Consider other options for solving your financial problems; or

Declare bankruptcy.

If you meet the conditions in the proposal in full, you will be legally released from the debts included in the proposal.

However, if you making monthly payments and miss three payments, or if your payment schedule is less frequent but your last payment is more than three months past due, the proposal will be deemed annulled. This means your creditors will be able take action to collect the money you owe them, unless the court has ordered otherwise, or unless an amendment to the consumer proposal has been files. A consumer proposal that has been deemed annulled may be revived under certain conditions.

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